Felix Salmon

Here is the Goldman Sachs pitchbook for the Abacus deal in question today. It spends 30 pages talking in great detail about ACA and its qualifications to manage CDOs; it never mentions Paulson. Here’s my favorite bit:

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The SEC suit against Goldman Sachs (full complaint here, and well worth reading) is explosive stuff. Essentially the SEC seems to have nailed down the kind of behavior that ProPublica was looking for in its story on the Magnetar Trade — a hedge fund which was short mortgages, in this case Paulson, was carefully picking nuclear waste to put into synthetic CDOs, unbeknownst to the final investors in those deals.

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Yesterday I went to a seminar at NYU where I heard Andrei Shleifer defend his paper on how financial innovation causes crises. At the same time, Mike Milken published an op-ed saying that financial innovation is a wonderful thing, and that what we really need to worry about is too much leverage and too little assiduous underwriting. “Over the long run,” he writes, “the best way to maximize profitability is not to increase leverage, but rather to analyze credit properly”.